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Earnings Drop Doesn't Faze Fannie Investors
Investors and analysts generally shrugged off Fannie Mae's announcement that net income dropped by 19% in the third quarter, focusing instead on a 22% jump in operating income. Fannie Mae reported operating net income of $1.631 billion in the third quarter, up 22% on a year-over-year basis. However, that excludes the "variability in earnings that results from including unrealized gains and losses from the change in the time value of purchased options" under new accounting rules, Fannie Mae noted. Once the impact of purchased options is taken into account, Fannie Mae's net income under generally accepted accounting procedures was $994.3 million, a drop of 19.1% on a year-over-year-basis. Just before noon Oct. 15, Fannie Mae's stock price was up 4% on the day.
BB&T, Doral Report Servicing Writedowns
BB&T Corp., Winston-Salem, N.C., has reported a $130.8 million writedown in its capitalized mortgage servicing rights in the third quarter. However, BB&T said the servicing writedown was offset by gains from the sale of securities held for sale, and the company reported record third-quarter earnings of $336 million, up 18.5% from a year earlier. Separately, Doral Financial Corp., San Juan, Puerto Rico, reported a servicing impairment of $7.5 million in the third quarter. Doral also said its decrease in servicing income was "more than offset by increases in gain on mortgage loan sales and fees, gain on sale of securities, and other sources of revenue" that benefited from lower interest rates. Doral reported record net income for the third quarter totaling $58.3 million.
Beacon Hill Confirms Hedge Fund Loss
Beacon Hill Asset Management LLC has confirmed Wall Street Journal and investor reports indicating that one of its hedge funds has suffered a short-term loss related to unusually wide mortgage-backed security vs. Treasury spreads in September. "As a result of extraordinary fixed-income market conditions last month and particularly in the final days of September, Beacon Hill Asset Management's Bristol Fund realized a loss," Beacon Hill said. "This situation was primarily the result of unprecedented, accelerated mortgage prepayments triggered by historically low interest rates, while U.S. Treasury securities prices rose in reaction to heightened global market and political uncertainty." The mortgage-backed bond market participant said that "no portfolio liquidation or significant investor redemptions have been experienced" since it announced the loss, and added that it does not expect any to occur. |
